POSCO International to invest $2.6 billion in energy operations

Korea's POSCO International, the trading arm of POSCO Group, on Friday formally merged with POSCO Energy, which handles liquefied natural gas (LNG) and renewable energy sources.

Set for official launch in January, the integrated company will be a specialized energy entity with annual sales of 40 trillion won ($28.2 billion) and will seek to expand and upgrade the LNG value chain and explore green energy markets such as that of hydrogen. To achieve these goals, it will invest 3.8 trillion won in its energy operations by 2025.

At its headquarters in Incheon, POSCO International that day in a shareholders' meeting received final approval for the merger. The board decided on the merger in its meeting in August, and with the shareholders giving their final OK, formal registration of the new corporation is slated for Jan. 2. New shares of POSCO International will be listed on Jan. 20, with majority stakeholder POSCO Holdings to own 70.7%.

At Friday's meeting, POSCO International CEO Joo Si-bo announced a massive investment plan as well as a strategy to foster energy operations. From next year, 3.8 trillion won will be invested through 2025 in line with the growth strategies of each business category: exploration and production (E&P), storage, power generation and eco-friendly energy.

E&P operations will receive 1.3 trillion won to speed up resource development. Through its affiliate Senex Energy, POSCO International seeks to triple its natural gas output in Australia by 2025 and boost its production base by seeking exploration rights in Indonesia next year.

In storage, the company will inject 1.6 trillion to enlarge its LNG infrastructure. Storage tanks with a combined capacity of 730,000 kiloliters at the company's Gwangyang and Dangjin LNG terminals will be expanded over the next three years. Through this, the company by 2026 plans to do 4.65 million tons of LNG transactions and build 1.81 million kl in storage capacity infrastructure in Korea by 2026.

The power generation division will receive 700 billion won to focus on eco-friendly transformation through methods like hydrogen co-firing in gas turbines. The goal is to run the world’s first gigawatt (GW) commercial power plant that uses hydrogen co-firing in gas turbines by developing Units 3 and 4 of an LNG power plant in Incheon to enable the method.

Through this investment, POSCO International has formed a comprehensive LNG value chain covering exploration and production to storage and power generation, and via profitable ventures, it will accelerate more green energy operations such as those of renewable energy and hydrogen.

The company's three-year investment plan is worth around 200 billion won for renewable energy generation. Its level of 0.1 GW will be expanded sevenfold by 2025 to produce energy from renewable sources like on- and offshore wind and solar power. Another plan is to expand an inactive ammonia (hydrogen) storage tank to boost storage capacity to 100,000 kl by 2025 and 510,000 kl by 2030.

POSCO International will self-generate 1.5 trillion won in funds a year as investment resources under the objective of nearly tripling the company's value from 4.4 trillion won to 13 trillion won by 2030. 

A POSCO source said, "The merger of the two companies will boost the new entity's global competitiveness by completing the value chain in the decentralized LNG sector," adding, "Together with the development of POSCO Group, we will emerge as a global corporation specializing in eco-friendly energy and helping national energy security."

With its first foray into resource exploration in 1997 at the invitation of the Myanmar government, POSCO International has expanded its energy business every year through projects like discovering 700 million barrels of oil in gas fields. The company was also Korea's first private entity for power generation, possesses 50 years of know-how in electricity supply and runs an LNG terminal.

Write to Kyung-Min Kang at kkm1026@hankyung.com